Montoya and Montoya

FAMILY COURT OF AUSTRALIA

MONTOYA & MONTOYA

[2017] FamCA 667

FAMILY LAW – PROPERTY – Interim – Where the parties are seeking competing applications for various interlocutory orders – Where the wife seeks orders for interim litigation costs finding, spousal maintenance in periodic and lump sum form, appointment of an accountant as an adversarial expert witness and specific disclosure – Where the husband opposes some of these orders

Family Law Act 1975 (Cth)

In the marriage of F and F (1982) FLC 91-214
Simonsen & Simonsen [2009] FamCA 698
Strahan v Strahan (interim property orders) (2009) 42 FamLR 203; (2011) FLC 93-466
Woden & Silver (No 2) [2015] FamCA 1108

APPLICANT:

Ms Montoya

RESPONDENT:

Mr Montoya

FILE NUMBER:

BRC

12476

2015

DATE DELIVERED:

31 August 2017

PLACE DELIVERED:

Brisbane

PLACE HEARD:

Brisbane

JUDGMENT OF:

Forrest J

HEARING DATE:

24 July 2017

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Mr J

SOLICITOR FOR THE APPLICANT:

Hopgood Ganim Lawyers

COUNSEL FOR THE RESPONDENT:

Mr Kirk QC

SOLICITOR FOR THE RESPONDENT:

Ryan Kruger Lawyers

Orders

Spousal Maintenance

That by way of interim spousal maintenance of the wife, the husband shall cause to continue to be paid or pay himself, the following:
(i)The loan repayments in respect of the loan secured by mortgage over the real property at B Street, Suburb C as and when they fall due;
(ii)The rates and water levies for the real property at B Street, Suburb C as and when they fall due;
(iii)The house and contents insurance for the real property at B Street, Suburb C as and when the premiums fall due;
(iv)Health insurance premiums for the policy that includes cover for the wife as and when they fall due;
(v)Maintenance and running costs for the motor car in the wife’s possession;
(vi)The costs relating to one mobile phone in the wife’s possession;
(vii)The sum of $750 per week, to be paid into a bank account nominated by the wife.
That by way of interim spousal maintenance the husband and the wife shall do all things necessary to cause the wife to be paid from the funds standing to the credit of the husband and the wife held on trust for them by the husband’s solicitors, the cost of replacing the pool filter at the property at B Street, Suburb C; the cost of repairing the Vaccumaid system at the property at B Street, Suburb C; and the cost of electrical repairs at the property at B Street, Suburb C on the presentation by the wife of invoices for said work, up to a maximum total of $5,000.

Interim Litigation Costs Funding

That pursuant to s 117(2) of the Family Law Act 1975, the sum of $260,000 be forthwith paid to the trust account of the wife’s solicitors out of the money standing to the credit of the husband and the wife held on trust for them by the husband’s solicitors, to be used only for the payment of the wife’s legal costs and outlays as such costs fall due and owing, and the husband and wife shall do all things necessary to authorise such payment.

Pleadings

That within 28 days hereof the respondent husband shall file and serve a Points of Claim document, in which he sets out the precise wording of the declaratory relief he seeks from the Court in terms of paragraph 4 of the orders he seeks in his Response to an Application in a Case filed on 16 June 2017 and in which he pleads the particular contentions of law and fact he relies upon as grounds for the relief sought by him, and all the material facts he contends will support the relief he seeks, but not the evidence by which the facts are to be proved.
That the Points of Claim document shall include particulars necessary to define the issues for, and prevent surprise at, a trial of the issues raised therein and to enable the other parties, particularly the wife, to plead in response.
That within 49 days hereof the husband’s mother and the husband’s brother shall each file and serve a Response to the husband’s Points of Claim document in which they each set out precisely whether they seek the same or any different relief from that sought by the husband and as to whether they agree with or dispute each and every contention of law and fact pleaded by the husband, pleading their own contentions of law and fact that may differ from the husband’s contentions.
That within 70 days hereof the wife shall file and serve a Points of Defence document in which she shall plead her responses to the husband’s Points of Claim and, additionally, to the Response pleadings of the husband’s mother and brother if any part of those is different to the Points of Claim of the husband.

Disclosure

That the husband shall produce to the wife within 14 days hereof:
(i)All documents upon which the husband intends to rely in the proceedings in relation to the contributions he asserts came from his family during the relationship of the husband and the wife;
(ii)All documents relating to the husband’s income and expenses;
(iii)His individual taxation returns for the financial years 30 June 2010 to date;
(iv)Statements for Westpac Choice bank account …32 in the husband’s sole name for the period 29 July 2016 to date;
(v)Statements for Westpac Altitude Black card account …32 in the husband’s sole name for the period 14 September 2016 to date;
(vi)Statements for all business credit card accounts used by the husband;
(vii)All statements for the Westpac loan account in respect of the loan secured by mortgage/s over units 1, 2 and 3 D Street, Suburb E.
That the wife shall produce to the husband within 14 days hereof statements for all bank accounts operated by or for the wife for the period from separation to date.

Accounting Expert

That the wife’s application to be given leave to adduce evidence from her own adversarial accounting expert, Mr F, is dismissed.

Further Directions

That the matter be adjourned for a directions hearing before his Honour Justice Forrest at 9.30 am on Thursday, 30 November 2017, and each of the parties shall file and serve by no later than Friday, 24 November 2017, a document being a Minute of Proposed Directions setting out the Directions that each will be asking the Court to consider making at the directions hearing on 30 November 2017.

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Montoya & Montoya has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT BRISBANE

FILE NUMBER: BRC 12476 of 2015

Ms Montoya

Applicant

And

Mr Montoya

Respondent

REASONS FOR JUDGMENT

For immediate determination in these financial proceedings pending in the Court are competing applications of Ms Montoya (“the wife”) and Mr Montoya (“the husband”) for various interlocutory orders.
The wife seeks orders for interim litigation costs funding, spousal maintenance in periodic and lump sum form, for the appointment of an accountant as an adversarial expert witness and specified disclosure against the husband.
The husband opposes the particular interim litigation costs funding order sought by the wife, but seeks an alternative one where he gets some money for his legal costs as well. He opposes the spousal maintenance orders she seeks. He does not oppose the disclosure orders the wife seeks but seeks similar “co-operation from her”. In particular, he is seeking an order that she particularise the orders she is seeking in the property proceedings. He opposes the order the wife seeks in respect of an adversarial expert.

The Background

The husband and the wife are each 43 years of age. The wife says they began a relationship in early 1997 and it is agreed that they married in 1999 and began living together then. Two children were born of their relationship in 2006 and 2008. The couple separated in August 2014. Their marriage was formally dissolved in June 2016. The children have continued to live principally with the mother in a home that is jointly owned by the husband and the wife and subject to a mortgage securing debt that is being paid off. They spend four nights each fortnight in the husband’s care.
Since before the relationship commenced, the husband has been working in a business said by him to have been established by his parents, him and his brother. This family business has always operated franchised outlets and has apparently prospered and grown over the years. The wife says she worked in the business for some years after their relationship commenced but became principally responsible for parenting and homemaking duties in the family after the birth of their first child, not working in the business thereafter.
The husband’s family operated their business until 2010 principally through a discretionary family trust of which they were all beneficiaries. They then entered into a contract with the Australian franchisor of a business chain to be the master licensee for that franchise in Queensland. The Australian franchisor is said to have insisted on the establishment of a new entity free of existing business commitments. A new discretionary trust was established (with the husband as the sole appointor), through which several of these franchises are owned and operated. The appointment of the husband as sole appointor of that trust is said by the husband to have been insisted upon by the Australian franchisor, but the husband refers to a Memorandum of Agreement executed by him, his brother and his mother at the time the new trust was established, which is said to evidence their agreement that the business operated by the new trust entity was owned by the three of them in equal shares.
Though the evidence demonstrates that there is markedly different performance amongst the various franchises that are owned, overall the Queensland business of the husband and his family has been performing well, generating reasonably good profits (in excess of $1,000,000 net operating profit per year) in recent years. Interestingly, despite the assertions of the husband that the business is owned by all three of the members of his family, since the commencement of the operation of the business at the same time as discretionary distributions of income have been made to the husband, the wife, the husband’s mother and the husband’s brother and his wife, significant discretionary distributions of income have also been made by the trustee of the relevant trust to a company that is owned only by the husband and the wife (in equal shares) and solely controlled by the husband. That company does not trade or do anything other than present as a corporate beneficiary of the trust for the apparent purpose of income sharing. The distributions of income to that company added to the distributions of income to the husband and the wife in the same period, result in the husband and the wife receiving a far larger share of the income generated than each of the husband’s mother and brother received in the same period.
That company has been valued by a single expert accountant as at 30 June, 2016 to be worth $1,894,690 on its own, with all of that net asset position being made up by the netting off of inter-entity loans, including the sum of $2,743,952 that is owed to the company by the original family trust of the husband’s family.
The single expert accountant retained by the parties to value all of the business interests provided a report in February this year. He valued all of the businesses and the parties’ interests in them as at 30 June 2016. The total figure he arrived at was $6,623,261 (including the parties’ interests ($1,894,690) in the corporate beneficiary referred to above) in addition to the net amount of $188,125 owing to the husband and the wife through the netting out of their own personal loan accounts in the various entities.
Significantly, there is dispute between the husband and the wife about a number of aspects of the business valuation. On the one hand, the husband asserts that the business, through the various entities that form the Montoya Group, is truly owned by him, his mother and his brother in equal shares. His mother and brother also assert that. The wife does not agree, seemingly asserting that it is owned by the husband and her, though that remains somewhat unclear at this point in time.
Consequent upon that dispute, the husband’s mother and brother sought leave to intervene in the substantive property proceedings and become parties so as to be able to advocate in support of their asserted interests. The father supported that, but the mother opposed it. I allowed them to intervene and they are now parties to the ongoing property proceedings, though they took no part in the hearing about interim costs funding, spousal maintenance and the expert witness issue.
The husband also asserts that the single expert’s valuation does not give proper consideration to the asserted fact that his is a minority interest in a tightly held family business or to the taxation consequences that would flow on funds being paid out to the husband and/or wife as a result of the property proceedings. On the other hand, the wife is asserting that the single expert’s valuation is wrong in several respects, resulting in a substantial undervalue being attributed to the business. She points to the opinions of another accountant that she retained to review the single expert’s report and to provide advice to her and her solicitors. It is that accountant she now wishes to be able to use as her own adversarial expert in the substantive property proceedings.
In early 2014, not long before the separation of the husband and the wife, the wife was diagnosed with lymphoma. She was the beneficiary of a payout from an insurance company on a trauma insurance policy the husband and the wife had taken out for her. A sum of around $531,500 was paid out and received by the husband and the wife after they separated. It was deposited into the husband’s solicitors’ trust account and held on trust for both the husband and the wife. By agreement between the husband and the wife, certain amounts have been paid out of that money since it was received. Some of that money was used to pay the wife’s legal costs and some of it was paid to her for her maintenance. There is approximately $360,000 remaining in that trust account now and it is all of that money the wife now seeks to access.
Prior to their separation, the husband caused $2,750 per week to be paid to him from the business (described by him as salary) and that was deposited into a joint account held by the husband and the wife. The wife accessed that money as she needed it. The wife says that after their separation that money kept being deposited into the joint account and she continued to be able to access it as she needed it. She and the children have continued to live in the family home since the separation. The husband says that he continued to access that money during that post-separation period, as well.
The wife says that from December 2015, the husband caused the amount deposited to that joint account to be reduced to $750 per week. The wife has still been able to access that money as she needed to, but now says it is not enough to meet the weekly expenditure needs of her and the two children. It is not disputed that the husband pays no separate or additional amount to the wife described as “child support”.
The wife has a new partner who has been living with her and the children in the family home for over a year now. The wife deposes to his gross income being $1,538 per week. She says that he pays for her and the children if they eat out or undertake some social activity together. She says he paid for her to travel overseas with him last year and also for her and the children to holiday with him late last year. She also says he helps out around the home with pool, yard and maintenance work, but otherwise gives no evidence that he pays for anything else, save for the internet connection at the home in which they live.
About this, the husband asserts that the wife’s partner does not contribute any amount towards the mortgage payments on the property, to the rates, to the insurance or the “maintenance expenses” for the property. The husband seemingly knows this as he says he pays for these things himself on an ongoing basis. It is not disputed by the wife.
The wife says she cannot work in employment at the moment because of her health. She suffers from lethargy and a decrease in her immunity that she says causes her to “feel run down” and to contract viruses, colds, influenza, asthma and other illnesses. She says she also suffers from depression. Her General Medical Practitioner says that she suffers from moderately severe depression and anxiety and is on medication for it. He says she also suffers from the lymphoma still. He does not consider she is able to re-enter the workforce in the foreseeable future. Her treating haematologist confirms she has lymphoma and that the outlook is uncertain as to whether she will require chemotherapy in the near future, but he thinks that it is likely that she will within the next 1-2 years. He says that there would be a good chance that she will respond to any such therapy.
The husband made no serious challenge, in my judgment, to the evidence that the mother is not well enough to seek out and obtain employment.

The Wife’s claimed Weekly Expenditure needs

In her affidavit, the wife set out her weekly expenses. They total $1,163. Excluded are expenses for the children. Included are expenses that the husband challenges as unnecessary or as expenses effectively twice claimed and others that he says he already causes to be paid. Those are:
Motor vehicle expenses, including petrol            $50 (already paid)
Health insurance premiums  $50 (already paid)
Holidays  $200 (unnecessary)
Second mobile telephone  $15 (unnecessary)
Gifts  $90 (unnecessary)
Credit card payments  $33 (double up)
Ironing  $30 (unnecessary)
Total   $441

Husband’s Income and Expenditure

The husband says his “salary” from the business continues at $2,750 per week. In his June 2017 Financial Statement, he deposed to that being his salary before tax, but he did not insert a figure for tax. He says he also receives $258 per week being his one-third share of the rent received on an apartment at Suburb E (though the evidence is that there are three Suburb E apartments that he owns a one third share in). He also receives $530 per week rental income for another property that he and the wife own in Brisbane that is tenanted. Those three amounts total $3,538 per week. I repeat, he says nothing about the personal income tax, if any, he pays.
The husband deposes to the following expenses:
The weekly payment to the wife   $750
Mortgage payment on home in which wife lives   $565
Mortgage on other Brisbane property  $378
Mortgage for the Suburb E units   $1,471
Rages and levies on home in which wife lives   $95
Rates and levies on other Brisbane property  $173
Rates and levies on Suburb E units   $86
Insurance on home in which wife lives   $40
Rent on his own property  $600
Health insurance for wife and children   $85
Children’s education and other expenses   $215
His other weekly expenses   $575
(includes holidays of $50 and gifts of $20)
Total   $5,033
The husband does not depose to how he makes up the shortfall of $1,495 between the $3,538 and the $5,033. I can only presume he causes that to be met by funds drawn from or paid by the business, probably being recorded as debits in his loan accounts. He has deposed to paying for his legal fees in these proceedings by using funds from the business that are recorded as debit entries in his relevant loan account. In fact, the Court was told he wants to repay the money he has “borrowed” from the business to pay his legal fees. Though there was conflicting evidence about the issue, the best evidence of the net value of the personal loan accounts of the husband and the wife is that it was $188,000 in credit at 30 June, 2016. For the purposes of this determination, I accept that evidence as correct. What remains unexplained on the evidence is why his legal fees have not already been debited as against that credit and now need to be repaid by him. I will return to that subject later in these reasons.

My findings about relevant matters in respect of these expenses claimed by both the husband and the wife

As for the matters challenged by the husband, I accept that the wife would have motor vehicle expenses of $50 per week and would have to pay those herself if the husband did not cause them to be paid as he currently does. I am satisfied that the same could be said of the health insurance premiums.
I do not accept that the wife can reasonably expect the husband to pay $200 per week for her to have holidays. The husband says he spends $50 per week on holidays for himself. I consider that a reasonable amount for the wife to spend on her own holidays whilst property settlement is pending.
Similarly, I do not accept that the wife can reasonably expect the husband to pay $90 per week for her to buy gifts for others. The husband says he spends $20 per week on gifts himself. I consider that a reasonable amount for the wife to spend as well.
I accept the husband’s argument that the expenses of a second mobile phone and ironing are not necessary and that the $33 per week credit card payments are realistically a doubling up of claimed expenditure and should not be included in a list of the wife’s reasonable weekly expenditure.
These findings would bring the wife’s reasonable weekly expenditure needs not already paid by by the husband to $792 if you do not include the $750 he already causes to be deposited to her use, or $42 if you do.
As for the husband, I am troubled by his reference in his evidence to the receipt of $258 per week being his share of the rent received on an apartment at Suburb E when, as I have observed, he owns a one-third interest in three such apartments. However, as they have all only been valued at around $1,345,000 it is possible that the total rent received for all three is $774 (around a 3 per cent per annum return on their value). For the moment, I will accept his evidence about that.
The evidence is that the total mortgage debt on the three Suburb E units is $1,700,000 and that it is an interest only loan. Repayments of $1,471 per week equal $76,492 per year. That equals 4.5 per cent of the total owed. Repayments of $4,413 per week (3x $1,471) would equal $229,476 per year or 13.5 per cent.
I do not accept that the husband and his mother and brother are paying that much on an interest only loan repayment. I am satisfied that it is more likely that the $1,471 per week that the husband says he is paying is the total amount repayable by all three of them. Accordingly, I will only consider the husband actually responsible for one-third of that amount, namely $490 per week. That would bring his claimed expenditure down to $4,053 per week. That leaves him with a shortfall of $515 that could readily be managed, I am satisfied, on an interim basis in these proceedings, by drawings against the business debited to his loan account (as any deficit probably already is). In any event, though little was said of the issue at the hearing, I am very conscious of the fact that the husband and wife are equal shareholders in the corporate beneficiary I have already referred to, Montoya Holdings Pty Ltd, that has net assets available to it to distribute as dividends to its shareholders (the husband and the wife) of $1,894,680. There is no evidence that persuades me some of that money could not readily be accessed by the husband (as the sole director of the company) by calling for some of the $2,878,000 that is owed to the company to be paid to it. I accept, of course, that would create some tax liability for them but the husband is already conscious of that and expecting the single expert accountant to consider that issue further.

The Wife’s spousal maintenance application

The wife seeks an order that the husband be ordered to pay her $1,163 per week by way of periodic spousal maintenance.
Section 72 of the Family Law Act 1975 (“the Act”) imposes a statutory duty on a party to a marriage to maintain the other party, to the extent the first party is reasonably able to do so, if, and only if, the other party is unable to support herself or himself adequately whether by reason of having the care and control of children of the marriage, by reason of age or physical or mental incapacity for appropriate gainful employment or for any other adequate reason, having regard to any relevant matter referred to in s 75(2) of the Act.
Section 74 of the Act empowers the Court to make such order as it considers proper for the provision of maintenance in accordance with Part VIII of the Act. Section 75 of the Act obliges the Court to take into account the matters referred to in subsection (2) when exercising jurisdiction under s 74. I will not set out the list of matters included in that subsection. I have read them and considered them in respect of this case.
Mr Kirk QC for the husband urged the Court not to make the order sought by the wife. In his submissions, he pointed to the fact that the wife has been living with a partner in a de facto relationship for over a year and that there is no evidence that the partner, who earns $1,538 per week, and is said to own his own property, contributes anything towards living in the home that the husband pays for other than doing some of the home and yard maintenance and paying for the wife and children when they go out to dinner, as well as when they go on holidays with him.
In support, Mr Kirk referred to a passage from the judgment of Fogarty J in In the marriage of F and F (1982) FLC 91-214 at page 77,148 where Fogarty J said:
It would in my view be quite inappropriate for a wife to live in a completely de facto relationship with another person, who contributes nothing to that household although able to do so, and still expect the husband to pay maintenance for her and that household. The husband is obliged to pay maintenance for the children … but is not obliged to contribute to the support of Mr T and in my view is not obliged to contribute to the wife’s maintenance.
Mr Kirk also referred to a more recent decision of Rees J in Woden & Silver (No 2) [2015] FamCA 1108 in which Rees J discharged an existing periodic spousal maintenance order where the wife was found to be living in a de facto relationship with a new partner.
The determinations and words of the Judges who decided those cases clearly provide support for the proposition that the husband should not be ordered to pay spousal maintenance to a former wife living in a de facto relationship with a new partner. Respectfully though, they do not amount to principle I am bound to apply.
In any event, Mr Kirk did not submit that I should dismiss the wife’s application but rather that the matter should be adjourned pending further disclosure by the wife about her expenditure needs and the partner’s financial circumstances. I do not consider that the proper order to make.
I am quite satisfied that the wife is unable to support herself adequately by reason of her state of health and the fact that she is the principal carer for the parties’ two children. I am satisfied, as I have said, that her reasonable weekly expenditure needs at the moment equal $792. The husband continues to pay the mortgage on the home she lives in. He pays the rates and levies and insurance on that property. He causes her phone bill and motor car expenses to be paid. He causes her health insurance premiums to be paid. He also causes the wife to be able to have access to an amount of $750 per week. As I have already observed, he does not pay the wife a separate child support payment as such for the support of the two children.
To his credit, the husband did not assert that he intends or even wants to stop making any of those payments. I consider it appropriate, given their comparable financial circumstances and given his continued access to the income generated by the successful business (by his salary and his drawings) that he does continue to pay those things until they settle the disputes in respect of their financial affairs or they are otherwise resolved. I am satisfied that it is a proper exercise of the power conferred on this Court by s 74 of the Act to actually make interim orders that require the husband to continue to cause all of those payments to be made or to make them himself. I will make such orders, but I will not order the husband to pay the wife an extra $42 to make up the shortfall that I have accepted exists between the $750 she receives from him and the $792 I determined to be her reasonable weekly expenses. I do not consider it appropriate to do so having regard to s 75(2)(m) (“if either party is cohabiting with another person – the financial circumstances relating to the cohabitation”) and the evidence as to the very limited extent of the wife’s new de facto partner’s financial contribution to the wife’s household in which he lives. However, I do not accept that the husband should not be making the payments that he does in respect of that property, the wife’s car, phone, health insurance and other needs simply because she is in a new relationship, particularly where two children of the marriage live with and are cared for by the wife and she receives no actual “child support” payment for them from the husband.

Interim litigation costs funding

The wife seeks an order that all of the $360,000 still held in the husband’s solicitors’ trust account be paid to her with $260,000 of that being characterised as a payment to the wife for her legal fees and the balance to be characterised at trial as either lump sum maintenance or partial property settlement already received by her. Specifically, she also seeks orders for a lump sum payment of spousal maintenance to pay $1,530 to replace the pool filter, $1,850 to repair the Vacumaid and $936.10 for electrical repairs. That is a total of $4,316.10.
The wife deposed in her April 2017 affidavit to owing $40,748.27 to her solicitors (which sum included $30,349.70 owing to her own shadow forensic accountant). She also deposed to having already received and paid $37,000 and $50,000 towards her legal fees in respect of these proceedings.
The wife further deposed to her solicitors’ estimate that her legal fees in this matter are likely to total a further $264,823 if the matter proceeds to trial. Present indications suggest it is likely to proceed to trial, particularly given the current disputes about the ownership of the business and the value of the husband and wife’s interests in the business. I have no reason to doubt the accuracy of the fee estimate.
The wife deposes that her solicitors have told her that they will not continue to represent her if their fees are not secured by payment into trust in advance. I have no reason not to accept that as correct.
The husband does not oppose the wife receiving funds to pay for her legal representation. In his June 2017 affidavit, he said that his solicitors had written to the wife’s solicitors four times with respect to “the loan that is owing by [him] to the [Montoya] Group for legal fees”. He did not put those letters into evidence. He also said that the loan is required to be repaid by him. He seeks the release of some of the money from the $360,000 left in the trust account of his solicitors so that he can meet his legal expenses, saying he has no recourse to additional cash monies to meet these ongoing expenses. The evidence is that the legal fees the husband has paid to 31 May this year are $128,005. He was told in mid-June that he owed another $6,610 and that the estimated costs of the interim hearing of these applications would be between $25,000 t0 $35,000 for preparation and $4,400 for the appearance plus $17,600 for the barrister to appear. He, too, said that his solicitors have told him his legal costs could be in excess of $250,000 if the matter proceeds to a four day trial. His solicitors require payment of money into their trust account in advance of the trial to secure their fees.
The husband asks for an order that the money held in the trust account of his solicitors be divided equally between the parties and that the Court then order that the parties take steps to access nearly $600,000 worth of equity in the Suburb G property to fund the additional legal fees that are likely not to be covered by an equal distribution of the amount of money currently in the trust account. The wife opposes this, submitting that the husband has been able to meet his legal expenses to date by accessing drawings against the business.
There is no dispute that the Court may make orders for the interim provision of litigation expenses pursuant to s 117(2) of the Act as they would be orders “as to costs” in “proceedings under this Act”. See Strahan v Strahan (interim property orders) (2009) 42 FamLR 203; (2011) FLC 93-466. For an interim costs order to be made there must first be justifying circumstances and, if there are, the Court may make such order as it considers just.
I am quite satisfied in this case that the wife has no access to money of her own to pay her solicitors as required. Accordingly, there are justifying circumstances for using the power conferred in s 117(2) to make interim litigation costs funding orders. I accept that she owed her solicitors approximately $40,000 in April and had been told she needs another $260,000 to pay those solicitors if the matter goes to trial.
I consider it just, in the circumstances, to order that the sum of $260,000 of that amount held in trust be paid to the wife’s solicitors’ trust account to be held by them and used solely on account of legal costs and outlays as they fall due and owing. In addition, I will order, accepting that it is a proper exercise of the power conferred by s 74 of the Act, that additional amounts be paid to the wife from the balance of the funds held in the trust account of the husband’s solicitors on presentation of invoices for the replacement of the pool filter, the repair of the Vacumaid and the electrical repairs, as referred to in the wife’s affidavit to a limit of $5,000, such amount to be considered as spousal maintenance.
I will not make an order for the balance of the money to be paid to the wife as she sought, not satisfied that there is a need for such an order at this point in time.
As for the husband’s application for some of that money to be paid to him for his legal costs, I am not persuaded by the evidence that the circumstances justify such an order.
I accept that the money he must pay to his solicitors is a personal expense and not a legitimate business expense. Thus, as was asserted by the business’ accountant when he gave oral evidence, any money that the husband draws from business accounts to pay his legal fees must be recorded as debit balances/drawings in his loan accounts in the business. As already determined, the net loan account balance for the husband and the wife at 30 June 2016 was around $188,000. Plainly, he may have gone close to already having drawn all of that credit balance by now in meeting his own legal costs. The assertion that he has borrowed the money from the business and is now required to repay it is inconsistent, in my judgment, with having been able to use the credit balance in the loan accounts that was there a year ago. Without more, I do not accept that he now has to repay all of the money to the business that he has already drawn and paid to his solicitors.
Furthermore, I am not persuaded that the financial circumstances of the business are such that the husband simply cannot continue to access funds from the business as he needs them to pay his legal fees as he incurs them. The evidence of the retained profits of the entities that make up the family Group and the net assets of the corporate beneficiary owned by the husband and the wife fortify me in taking this position. At this time, I will not make an order that the balance of funds in the trust account of the husband’s solicitors be paid to the husband or that the husband and wife access the equity in one of their jointly owned properties so that they can use that to pay their legal costs.

The Accounting Expert

The wife seeks leave to adduce evidence from Mr F, a forensic accountant she has retained to provide her with advice as to the valuation of the interests of her and the husband in the Montoya Group.
She acknowledges that Mr H has been jointly engaged by both the husband and her to prepare a valuation for them. That has been done with a valuation report provided in February this year. The wife sought her own advice from Mr F after receiving Mr H’s report. Mr F advised the wife that he considers Mr H has undervalued the Group. Consequently, the wife seeks leave to adduce evidence in the proceedings from Mr F “on the basis of the significant difference in the purported value of the Group as estimated by [Mr F] and [Mr H]”.
The application is brought pursuant to Rule 15.49 of the Family Law Rules 2004.
That rules provides relevantly that:
If a single expert witness has been appointed to prepare a report or give evidence in relation to an issue, a party must not tender a report or adduce evidence from another expert witness on the same issue without the court’s permission.
Rule 15.49 (2) provides:
The court may allow a party to tender a report or adduce evidence from another expert witness on the same issue if it is established that:
(a)There is a substantial body of opinion contrary to any opinion given by the single expert witness and that the contrary opinion is or may be necessary for determining the issue;
(b)Another expert witness knows of matters, not known to the single expert witness, that may be necessary for determining the issue;
(c)There is another special reason for adducing evidence from another expert witness.
Without specifically referring to one or more of those three matters that need to be established for the Court to determine that it will allow evidence to be adduced from an adversarial witness, Mr J, counsel for the wife, submitted that the significant differences in opinion between the two experts justified leave being given to the wife to adduce evidence from Mr F.
I am not convinced by that submission and I am not satisfied that any of the circumstances set out in Rule 15.4(2) are established at this time. As Mr Kirk submitted, the application is premature at best.
In Simonsen & Simonsen [2009] FamCA 698 Murphy J, deciding a similar application, said:
12.The general thrust of the Rules has been referred to by the Full Court in Bass & Bass (2008) FLC 93-366. As the court in that case made clear, the adducing of evidence from an additional expert, is not something which ought occur in the usual course, or simply by application made by a party. In simple terms, the word “special” as used in rule 15.49 has real meaning.
13.It is important to understand that Part 15.5 of the Rules does not preclude a party from obtaining on their own behalf expert evidence, nor does it preclude a party from obtaining such expert evidence, (including from more than one expert, should they so choose), in respect of all matters relevant to the proceedings before a court, and all matters relevant to a report and/or evidence produced by a single expert.
14. Thus, expert evidence obtained by a party on their own account can be used, for example, to significantly inform the cross-examination of a single expert witness at a trial. The restriction inherent in the rules is a restriction related to the adducing of evidence from the expert or experts retained by a party.
Murphy J’s words do highlight the plain fact that the wife was perfectly entitled to obtain advice and opinion from Mr F. She is entitled to continue to do so and to use that advice and opinion to help her and her solicitors to determine their input into joint instructions given to the single expert, Mr H, when the time comes for him to prepare an updated or addendum report. She is entitled to use that advice and opinion to frame any questions to be put to Mr H as is permitted by the Rules. And, if she is so advised, she can make fresh application to adduce evidence from Mr F if she considers that one or more of the pre-conditions for the exercise of the discretion to allow evidence from Mr F to be adduced for the trial can be established. That has just not been established on this application.

Instructions to Single Expert

The husband seeks an order that the wife “execute all documentation” to enable the single expert to prepare a schedule to his valuation report that includes his opinion on the taxation liabilities of the Montoya Group and also as to the issue of whether a discount is to be applied to the husband’s interests in the Group due to his asserted minority “shareholding” in the Group.
However, I consider that is also premature at this point in time.
In his Response to an Application in a Case, the husband also sought a declaration that his mother and brother “each hold a one-third interest, by way of constructive trust, in the [K Trust] [the trust that owns the businesses] and related entities”. The wife did not consent to that and opposes such a declaration at this point in time. Consequently, at the hearing before me, Mr Kirk submitted that the matter should be set down for a hearing as a discrete issue before the property proceedings between the husband and the wife proceed to trial. At the same time, Mr Kirk submits that the wife should be ordered to “particularise the Orders sought by her on a final basis”.
I am currently attracted to the merit of Mr Kirk’s submission that the matter should be set down for a hearing on the discrete issue as to whether the assets of the K Trust and the other entities are property of the parties or either of them or whether only a one-third interest in those assets is to be so treated as property of the parties or either of them in the property settlement proceedings.
I do not consider that Mr H as the single expert should be instructed to provide further advice as sought by the husband until such a discrete hearing has taken place or ruled out. I do not consider that the wife should be ordered to particularise the relief she seeks on a final basis in the property settlement proceedings before then either.
As the husband seeks the declaration that I have set out in paragraph 66 hereof, I consider that he should file and serve a pleading in the form of a Points of Claim document in which he sets out the precise wording of the declaratory relief he seeks and pleads any contentions of law and fact he relies upon as grounds for that relief he seeks, including the material facts he contends will support the relief he seeks, but not the evidence by which the facts are to be proved.
As the husband’s mother and brother have been given leave, on their application, to join the proceedings, I consider that they should each then file a Respondent’s Response to the Husband’s Points of Claim document in which they each set out precisely whether they seek the same or any different relief from that sought by the Husband and as to whether they agree with or dispute each and every contention of law and fact pleaded by the husband, pleading their own contentions of law and fact that may differ from the husband’s contentions.
When the wife has had time to consider these pleadings of the husband, the husband’s mother and the husband’s brother, I consider that she should then file her own pleading, which I shall style as a “Points of Defence” for the purposes of giving it a name. In that Points of Defence the wife shall plead her responses to the husband’s Points of Claim and additionally to the Response pleadings of the husband’s mother and brother if any part of those is different to the Points of Claim of the Husband.
I will list the matter for a further mention before me after the expiration of the time within which this pleading process is to be concluded so as to consider further whether the matter should be listed for a discrete hearing to determine the issues raised in these pleadings and, whether it is or not, to make further directions to progress the matter, including in respect to matters pertaining to the instructions to be given to the single expert if they are considered necessary at that time.

Disclosure

Of course, the pleading process will define the issues between the parties in respect of their interests in the entities and businesses that make up the Montoya Group and disclosure, relevant to those issues, will need to follow to the extent that it has not already occurred. In the meantime though, the husband did not oppose the disclosure orders the wife seeks be made against him. Accordingly, they will be made.
The husband seeks disclosure orders against the wife. Some of those were directed particularly at the spousal maintenance application, others not plainly so directed. Having dealt with the interim spousal maintenance application of the wife, I do not consider the disclosure sought that relates to that issue to be required now. Similarly, I do not consider that the updated Financial Statement of the wife sought by the husband is required to be ordered as the wife did file one after the filing of the husband’s Response to an Application in a Case in which he sought the order. Copies of all bank statements for operating bank accounts of the wife should be disclosed as sought by the husband
Finally, no submission was made in opposition to the husband’s application for an order that the wife disclose a letter of instruction to Mr F dated 21 October 2016. However, an affidavit of Mr F was filed. It exhibited some letters of instruction he had received. There was none dated 21 October 2016. The husband says nothing of it in his affidavit. Mr Kirk said nothing of it in his written submissions. Accordingly, I will not make the specific order sought by the husband.
I make the orders set out at the commencement of these written reasons.

I certify that the preceding seventy-six (76) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Forrest delivered on 31 August 2017.

Associate:

Date: 31 August 2017

[2017] FamCA 667

31 August 2017

Key Legal Topics

Areas of Law

Family Law

Civil Procedure

Legal Concepts

Costs

Discovery

Expert Evidence